September 22, 2011

Recession Fears Drive the DOW Down – The U.S. stock market extended its sell-off to four days, as it traded down 391 points. Today’s volume was extremely heavy, which may be an indication that traders fear more losses to come. Markets are down worldwide, as recessionary fears are global and not just in the U.S.

Typically, gold follows the stock market down on days with significant downward momentum such as today. Traders have to sell whatever they can to raise cash and cover margin calls. They literally go by the motto coined by Art Cashin, “if you can’t sell what you want, then sell what you can.” Gold is liquid; they need cash, so gold gets sold. Speaking of Art Cashin, he is quoted today as saying stocks have not bottomed yet.

Silver, platinum and palladium all suffered steeper percentage declines than gold. These metals all have much higher industrial applications than gold, so if industry is slowing, demand could go down. Although gold went down almost $80 per oz, it did rebound slightly about mid-day and held. There is no news that would normally send gold prices down. In fact, under more normal circumstances, when fear comes into the market, gold prices tend to go up. Asian markets are about to kick in and since China and India represent 52% of the worldwide gold purchases, it could be an interesting night.

At 4PM (CT) the APMEX precious metal prices were:

· Gold price - $1,739.00 – down $69.10

· Silver price - $35.92 – down $4.57

· Platinum price - $1,688.80 – down $102.40

· Palladium price - $648.00 – down $65.80